However, when it is combined with the TOWS (threats, opportunities, weaknesses, strengths) analysis, it becomes a breeding ground of strategies that the company can utilize to succeed in the competition. The SWOT (strengths, weaknesses, opportunities, threats) analysis is a fairly common and easily understandable term that entrepreneurs use in describing their companies, but seldom used in its full potential. Alone, it only describes the current situation the business is in, nothing more. However, when it is combined with the TOWS (threats, opportunities, weaknesses, strengths) analysis, it becomes a breeding ground of strategies that the company can utilize to succeed in the competition.

In creating your SWOT analysis, you have to keep in mind that strengths and weaknesses are internal — that the factors are characteristics of your company unique among your competitors. An example could be that your business is situated at the most convenient location to your target market (strength), or perhaps your company is the only company that does not offer this type of additional service as compared to your competitors (weakness). It is not enough to say that X is your strength because you earn from it. You have to look at your competitors to know whether or not that is truly a strength, or an industry standard that everyone follows.
On the other hand, opportunities and threats are external — that the factors are present in the entire industry and are available for most if not all competitors. One example of an opportunity for the food service industry is that food blogging has been proven to be an effective tool in marketing your restaurant. Food blogging, therefore is an opportunity for restaurants to market their businesses.
After having formulated your SWOT analysis, you can now follow up with the TOWS analysis. The TOWS analysis is a tool that an organization can use to formulate different strategies that the company can take, factoring in all the elements listed in your SWOT. It follows a 2x2 grid, comparing your strengths and weaknesses to your opportunities and threats. By comparing them in pairs (SO, ST, WO, WT), you are challenged to formulate plans on how to address two issues at once.

Strengths – Opportunities
The first combination in your TOWS asks you to create a strategy that both utilizes a company’s strength to take advantage of industry opportunities. For example, if your company is the most dominant online among your competitors, and you know for a fact that online shoppingis a strong trend in the market, then perhaps it is time to bring your store online and be the first among your competitors. Your online dominance will prove to be your greatest asset in selling online.

Strengths – Threats
The second combination asks you to use your strengths in order to minimize the impact of industry threats to your company. The best example for this is continuous innovation. If there are existing substitute products in the market, then perhaps you can create strategies that will enhance your products, or add more value that those substitutes could not match? Large companies who have tremendous amount of cash can consider buying off their competitors, their “threats” in order to remain the leading brand. We have seen that in a lot of big names from different industries.

Weaknesses – Opportunities
The third combination asks you to create strategies that will minimize your weaknesses by taking advantage of industry opportunities. A classic example for this combination is outsourcing certain parts of your production line in order to save your already limited budget, especially if you know doing the task in-house will only cost you more money. To illustrate this, imagine a company that sells exclusively online. While it may be at a disadvantage not having a physical store, it can wisely use third-party logistic companies to handle the delivery, instead of having to hire dedicated people to do it in-house.

Weaknesses – Threats
The last and the most defensive strategies could be formulated as you create strategies that both minimize your company’s weaknesses and protecting it from industry threats. Some of the strategies in this combination are actually easy and obvious. Are you the only company that does not offer products online? You know you are not generating enough conversion from your magazine and yellow page ads. Why not cut those and start marketing online in order to start fixing your conversion rate, as well as catch up with the industry as they take on the online competition?

The SWOT and TOWS analyses are not just for large companies with sophisticated R&Ds. Even SMEs can use it. You just have to have proper understanding of your business, as well as enough research in the local news and the pop culture and trends your market could be into. It’s not enough to just create new ideas and test it immediately. Base them on your current capabilities and the state of the industry and its market.

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Ruben Anlacan Jr. is the president and
CEO of BusinessCoach, Inc.